Tax rate to use in interviews now?

newkid2019's picture
Rank: Baboon | banana points 100

Hi guys:

On many of the technical interview guides, questions on 3 financial statements still use the assumption of tax rate = 40%. Given the new corporate tax rate is around 21%, do we need to adjust to using 20% when we walk through these questions in interviews?

Thanks!

Comments (14)

Funniest
Feb 6, 2019

70%

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Feb 6, 2019

Most of the interviewers I've come across (PE) tell me to use 40% during the depreciation walkthrough question. Doesn't really matter at the end of the day. Main idea is making sure you understand the flow b/w the statements.

Feb 6, 2019

What's the depreciation walk through question?

Feb 6, 2019

walk me through how increasing depreciation by $10 affects the three financial statements

Feb 6, 2019

Ask the person who is interviewing what tax rate they want you to use if they don't already provide you with one. I've often been given a rate of 35% as a way of throwing me off from the typical 40%.

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Feb 6, 2019

agreed, way more important to understand the concept. If you have a good foundation it really doesn't matter what rate you use.

Feb 7, 2019

Given you already know its 20%, just start your reply /answer by saying "Using a 20% tax rate, which is close to the current level of 21%, XXX...."

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Feb 7, 2019

You should use 50% to signal you're expecting a phat bonus

Feb 7, 2019

So funny when candidates walk me through their bullshit, reheresed answer to this question but cant walk me through a P&L (always my follow up). Amazinh how many IB analysts truly dont know what a P&L looks like. It's like what do you do for a living?

Feb 7, 2019

I use 27% which would include estimated state & local taxes. Keep in mind though that what gets treated as taxable income under the current tax law is now fundamentally different from what used to be treated as taxable income.

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Feb 8, 2019

Got asked to use 20% in the $10 depreciation question in several interviews this past fall

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